(Updates with details of ISDA meeting on CDS)
By Robert Smith
LONDON, Dec 10 (IFR) - Abengoa said in a stock market notice on Thursday that it had not repaid notes issued under its commercial paper programme, prompting ISDA to evaluate whether payouts will be triggered on the company’s credit default swaps.
The Spanish energy company made the announcement further to a notice given on December 4 relating to the negotiations with its creditors, which are being held under the protection of article 5 bis of the Spanish insolvency law.
ISDA’s credit derivatives determinations committee made an unusual split decision on whether a bankruptcy event had occurred at Abengoa on Tuesday. This said the company’s announcement of pre-insolvency proceedings triggered a bankruptcy under its 2003 credit derivatives definitions, but not under its updated 2014 definitions.
Market sources say almost all outstanding Abengoa CDS contracts are written under the updated definitions.
Abengoa announced on November 25 that it would enter pre-insolvency proceedings, giving it up to four months to reach an agreement with creditors to avoid a full-blown insolvency process and a potential bankruptcy. This is the first day the company stopped paying commercial paper, according to the notice.
The notice said Abengoa has not paid the following instruments: a US$3.8m note maturing on November 25, a US$1.5m note maturing the same day, a 2.25m note maturing on December 2, a 1.1m note maturing on December 3, a 1.104m note maturing on December 10 and a 4.4m note also maturing on December 10.
The notes were all issued under Abengoa’s 750m Euro-Commercial Paper programme, taking the form of zero-coupon debt. This means holders did not benefit from interest payments and would only realise returns if the notes were repaid at maturity.
IFR reported earlier on Thursday that market participants were seeking to determine whether Abengoa repaid commercial paper last week, as a failure to pay could trigger payouts on the Spanish energy company’s credit default swaps.
A general interest question has now been posted to ISDA’s credit derivatives determinations committee, to determine whether a failure to pay event has occurred. The question cites the stock market notice.
The committee has accepted the request and will meet to decide whether a credit event has occurred at midday on Friday. (Reporting by Robert Smith, Editing by Helene Durand, Julian Baker)